Marriott-Starwood merger: An opportunity or a threat?

In India too, the impact of this deal is significant. Together, the combined room inventory of the Marriott-Starwood hotels will make it the largest of any hotel chain in IndiaDecember 09, 2015, 15:00 IST

Recently, Marriott announced that it was buying Starwood in a $12 billion deal that would create the world's largest hotel company, with over 5500 hotels and 1.1 million rooms spanning 100 countries and 30 brands. Naturally, the effect of this new mega corp will be far reaching in the global hospitality business and will change things for consumers as well.

In India too, the impact of this deal is significant. Together, the combined room inventory of the Marriott-Starwood hotels will make it the largest of any hotel chain in India. And for the first time in 113 years the Taj Group's preeminent position as India's largest hotel brand will be surpassed.

This article is not about the nuances of the deal and its financial implications, but what it means for Indian travellers and for Indian hotel chains.

From a traveller's perspective, the bigger combine of hotels from Marriott and Starwood means:

1. Easier access to more choices: While the individual brands will continue to have their identities and separate web properties, most consumers look for hotel options at a city level. And that's where they will be delighted to find a wider choice across brands and price points and locations, all in one place. Without having to go to different sites. The Marriott-Starwood combine might well rival some of the better known hotel aggregator portals.

2. More attractive Rewards programme: Worldwide Marriott and Starwood would now boast a combined 75 million members across their loyalty programmes. In India too, members of one loyalty programme would now have a wider choice of rewards to redeem, across a much larger array of brands and locations. One more reason for travellers to opt for these brands while booking their next hotel stay.

3. Cheaper prices for a better quality experience: The efficiencies of scale that the combine will bring to all brands in the Marriott-Starwood fold will help the hotels offer better 'deals', either in terms of direct room rates or in terms of value-added services that travellers crave. This rate advantage is also likely to translate into smart upselling opportunities for the hotels that consumers lap up for their greater perceived value.

From the perspective of other hotel brands in India, this new hospitality landscape will mean:

1. Greater pressure on filling rooms and for achieving room revenue targets: Not only would the costs of acquiring guests go up in terms of marketing and advertising but also the pressure on discounting to win a customer would increase. Thereby affecting the profitability of the hotel chains.

2. Customer retention would become a bigger challenge: The enhanced power of the Marriott-Starwood loyalty programmes would make loyalty more ethereal for the other hotel chains. Guests would rather choose a hotel where every stay gives them something in the future, perhaps in the form of holiday stay offers. And lifestyle experiences that they can redeem against points earned.

But adversity is the best opportunity to do things differently. And the smart Indian chains are likely to take on the 800 pound Marriott-Starwood gorilla in several ways:

1. Look to create more distinct offerings: Focusing on what is unique in their offerings whether in terms of location, hotel design, service ethos, and destination offerings will help these chains stand out from the new big combine. And also attract the consumer who is jaded by the sameness of hotel offerings over the years. Taking on specific brands from the Marriott-Starwood portfolio more aggressively would help rather than trying to compete at a general level.

2. Focus on new lodging segments : AirBnB is a great example of a brand that disrupted the global hospitality business even without owning a single hotel room of its own. There is no reason smart Indian hotel brands cannot rethink their businesses. And focus on growth from new lodging segments that address the needs of the millennial travellers, rather than the guests of yesterday.

3. Innovative loyalty programmes: It will be very hard for Indian chains to compete with the Marriott-Starwood rewards programme on their own steam. But smarter tie-ups with other global service providers like airlines, credit cards and even big ecommerce brands will allow them to offer their guests a wide array of redemption opportunities way beyond the footprint of their hotels in India and abroad.

4. New reservation channels: The time has come to look beyond hotel websites and travel intermediaries as the key booking channel. An aggressive focus on selling through experiential and community-focused channels like social media can help Indian brands sidestep the giant shadow of Marriott and Starwood, and create new ways of reaching and wowing potential customers.

No doubt, the coming months will see a lot unfold in the Indian hospitality landscape. As a long time hotel marketer and observer of the business, I am very excited at what's ahead. And watching closely, who will win.

(The author is a digital & marketing advisor and tweets at @ashoklalla. Earlier, he spent 12 years at the Taj Group.)